Executives
Jack Howarth -- Vice President, Investor Relations
Brian Markison -- Chairman, President and CEO
Joe Squicciarino – CFO
Steve Andrzejewski -- Chief Commercial Officer
Analysts
Louise Chen -- Collins Stewart
Adam Greene -- RBC Capital Markets
Greg Gilbert -- Banc of America-Merrill Lynch
Scott Hirsch -- Credit Suisse
Gary Nachman -- Leerink Swann
Corey Davis – Natixis
Ian Sanderson -- Cowen & Co.
Shibani Malhotra -- Goldman Sachs
Marc Goodman -- UBS
John Newman -- Oppenheimer
Elliot Wilbur – Needham & Co.
Michael Tong -- Wells Fargo
Bert Hazlett -- BMO Capital Markets
David Buck -- Buckingham Research Group
King Pharmaceuticals, Inc. (KG) Q2 2009 Earnings Call Transcript August 6, 2009 11:00 PM ET
Operator
Good morning. Thank you for joining today's King Pharmaceuticals second quarter 2009 financial results conference call. Please welcome Jack Howarth, Vice President of Investor Relations of King Pharmaceuticals.
Jack Howarth
Thanks, operator. Good morning, everyone. Thank you for joining us today to discuss our financial results for the second quarter ended June 30, 2009.
Joining me on today's call are Brian Markison, Chairman, President and Chief Executive Officer of King; Joe Squicciarino, King's Chief Financial Officer; and other members of our management team.
Before we begin today's call, I would like to remind you that any discussion that takes place during this conference call may contain forward-looking statements that reflect management's current view of future events and operations, including but not limited to statements pertaining to expectations regarding our product development pipeline, our plan to maximize the potential of our existing products, our future financial results and our strategy for long-term growth.
Forward-looking statements involve certain significant risks and uncertainties, and actual results may differ materially. Certain factors that may cause actual results to differ materially from the forward-looking statements are discussed in the Company's press release issued this morning, August 6, 2009, and in the risk factors section and other sections of the Company's Form 10-K for the year ended December 31, 2008, and Form 10-Q for the quarter ended March 31, 2009, which are on file with the SEC.
King does not undertake to publicly update or revise any of its forward-looking statements, even if experience or future changes show that the indicated results or events will not be realized.
In addition to our financial results determined in accordance with Generally Accepted Accounting Principles, known as GAAP, King also provides adjusted net earnings and adjusted diluted earnings per share results. These non-GAAP financial measures exclude the effect of amortization of intangible assets and imputed interest expense associated with the Company's $400 million convertible senior notes, in addition to those special items that do not relate to the Company's ongoing underlying business, are nonrecurring or are not generally predictable.
Examples of these are listed in the About Adjusted Financial Results section of our press release issued this morning. We believe that providing adjusted financial results enhances the analysis of our Company's ongoing underlying business when comparing results to those of a previous or subsequent like period. However, it should be noted that the determination of whether to exclude an item from adjusted financial results involves judgments by King's management.
A reconciliation of King's adjusted financial results to reported financial results determined in accordance with GAAP for the three and six months ended June 30, 2009 and 2008 can be found in this morning's press release. In order to give everyone an opportunity to ask questions in an orderly fashion, I'd like to ask each participant to limit questions to one each and then return to the queue for follow-up questions. Thanks in advance for your cooperation.
Now I'll turn the call over to Brian Markison, Chairman, President and Chief Executive Officer of King.
Brian Markison
Thanks, Jack, good morning, everyone. I'm sure by now you've all had a chance to review today's earnings release. I'd like to take a minute to highlight some of our recent accomplishments before I turn the call over to Joe for a review of our financial performance.
During the second quarter we continued to advance our pipeline and focused on gaining regulatory approvals for our trio of opioid products, both of which are still under review by the FDA. We believe Embeda will be the first in a series of product approvals featuring long acting and short-acting opioids utilizing new technologies designed to reduce drug liking and euphoria associated with nonmedical use. Once approved, we plan to launch Embeda in the fall of this year and have already scheduled regional meetings with our sales representatives to begin refreshing the training they have already received.
Our commercial team has done extensive research on the long acting opioid market, and we believe our pricing and managed care strategy coupled with a the sales force that has already built relationships with pain specialists while detailing Avinza, and, in the past, Kadian, will lead to successful commercialization.
With respect to the other to opioids in our pipeline, we've had some recent news on both. On July 2nd we announced that we received a complete response letter from the FDA regarding Acurox. The letter raised issues regarding the potential abuse deterrent benefits of Acurox.
We have had a chance to reflect on the contents of the letter with our partners at Acura and believe that our responses to the agencies questions will provide greater clarity. We also plan to meet face to face with the agency before the end of the third quarter in order to reach agreement on the next steps that need to be taken.
On July 7 we announced the outcome of our early July meeting with the FDA on Remoxy. The meeting was very productive and we came away with an agreement on exactly what we need to do to advance the Remoxy application.
We continued to anticipate a midyear 2010 resubmission. While impossible to predict the timing of the review period, we are fully aware of the importance the agency has placed on this application and the overall importance the FDA has placed on opioids in development that are difficult to tamper with.
To summarize where we are with our opioid franchise, I'm sure you will agree pursuing formulations of existing opioids designed to resist common methods of misuse and abuse is challenging at best.
We believe the experience gained throughout the Embeda development process was a valuable one, and we will be using these experiences as we work with the agency toward timely resubmission of the applications for Acurox and Remoxy.
Turning to other pain management opportunities in development, we will continue to review phase 3 results for our ketoprofen and transfer some gel product over the next several months.
We will also evaluate the market potential for this product and review resource requirements before filing the NDA. When we complete the phase 3 data analysis and resourcing studies, we will update guidance relative to our disposition towards this program and its timing.
In collaboration with Direct, we are finalizing the development plan for the Eladur bupivacaine patch and expect to initiate related activities during the second half of this year.
With respect to the pipeline advances outside of our pain franchise, earlier this year the FDA provided the company with a PDUFA action date of October 18 for its review of the NDA for CorVue, our second generation pharmacologics trans-imaging agent.
Last week we had an advisory panel meeting at which the safety and efficacy data were discussed. As a result of the various observations made at the advisory committee meeting, we plan to supplement the original NDA with additional information.
We continue to be excited about our late-stage pipeline and, more importantly, the potential that our novel opioid formulations could have in reducing the risk of certain methods of misuse and abuse commonly associated with existing prescription medicines.
We remain committed to working closely with the FDA on each of these applications as well as the ongoing development of the NT pipeline as it relates to oxycodone and hydrocodone formulations.
With our innovative pipeline of pain management products we believe we are well positioned to treat a wide range of patients and play a large role in addressing the important societal issue of prescription drug abuse.
Now for a review of our financial results, I'll turn the call over to Joe Squicciarino, our Chief Financial Officer.
Joe Squicciarino
Thank you, Brian, and good morning. I would like to begin by noting that in the second quarter of 2009 we are, of course, reporting GAAP financial results and also adjusted financial results. The adjusted financial results will continue to exclude special items, as in the past, as well as the effect of the amortization of intangible assets and imputed interest expense associated with a change in accounting treatment for our $400 million convertible senior notes.
We began reporting on this basis in the first quarter of this year, and it is consistent with the reporting of many of our peers. I'd also like to remind everyone that since we completed our acquisition of Alpharma on December 29, 2008, Alpharma's financial results are excluded from King's second quarter 2008 results.
Now for a review of our second quarter. Revenues for the quarter totaled $445 million. Net revenue from our Branded Pharmaceuticals segment totaled $275 million. With respect to our Branded Pharmaceuticals segment I would like to highlight prescription trends for the Flector Patch.
This quarter saw three consecutive months of TRX growth with a record number 76,000 TRXs in June. We continue to be optimistic with respect to the growth potential for this product, while our managed care team is continuing to negotiate improved reimbursement status with our customers.
Flector revenues for the second quarter were a record $39 million and were in line with demand. Net sales of Thrombin-JMI were $49 million in the second quarter of this year compared to $64 million last year. The decline in net sales was split evenly between lower price and lower volume levels. Skelaxin net sales in the quarter totaled $102 million compared to $107 million last year. Skelaxin continues to perform well despite the absence of sales force support.
Total Company revenues during the second quarter include $83 million from our Animal Health business, an increase of $3 million over the first quarter of this year. Sales were about the same as last year once the adverse impacts of foreign currency effects are excluded.
Our Meridian Auto-injector business recorded revenue of $72 million in the second quarter compared to $55 million last year. This increase was driven primarily by higher unit sales of products sold to the U.S. Department of Defense and higher unit sales of EpiPen to our partner EpiPen to our partner, Dey Labs. Both the Animal Health business and Meridian continued to provide meaningful levels of cash flow to the Company.
Gross margin excluding special items was approximately 69% in the second quarter. Although gross margin during the quarter slightly exceeds our full-year forecast, we continued to forecast a gross margin of 68% for the full year.
Total selling, general and administrative expense excluding special items and our co-promotion fee for Altace was $119 million in the second quarter of 2009. Although we expect SG&A expense to increase in the next two quarters as compared to this quarter with the potential launch of Embeda, we’ve achieved synergies through our pharma integration process much faster than we originally anticipated.
We currently anticipate that synergies will reach $80 million this year. Therefore, we now expect full-year SG&A of $540 million to $560 million, down from $560 million to $580 million. Excluding special items, depreciation expense totaled $14 million in the second quarter compared to $10 million in the same quarter of last year.
Research and development expense excluding milestone payments equaled $21 million during the second quarter, down from $28 million last year, primarily due to the timing of costs incurred on current R&D projects.
Our effective tax rate for the second quarter excluding certain non-GAAP adjustments and special items was approximately 39%. This quarter's tax rate was impacted by a discreet item pertaining to accelerated stock vesting stemming from our restructuring activities. We are still forecasting a 37% tax rate for the full year.
As of June 30, 2009, our domestic cash balance was $201 million. Ex-U.S. cash balance was $241 million. Cash from continuing operations for the second quarter was just over $100 million and was depressed by approximately $44 million of severance payments from our restructuring activities announced earlier this year.
We continue to forecast full year cash from operations of $375 million to $400 million. During the second quarter, we made payments totaling $152 million on our outstanding debt. This represents $93 million in excess of that required by our repayment schedule. As a result, the face value of our total outstanding debt as of June 30 was $825 million.
With respect to investments in debt securities, during the second quarter we received $24 million as a result of the liquidation of securities. As a result, the par value of our investments in debt securities totaled approximately $383 million as of the end of the second quarter.
To summarize our second quarter performance, we continue to track well against our previously stated financial guidance. Our balance sheet is strong and, given significant levels of cash flow, we're continuing to evaluate business development opportunities.
I would now like to turn the call back over to the operator for a question and answer session. Operator?
Questions and Answer Session
Operator
(Operator instructions) Our first question comes from the line of Louise Chen of Collins Stewart. Please state your question.
Louise Chen -- Collins Stewart
My question was with respect to your abuse-deterrent opioid franchise. Based on comments made by the FDA, it sounds like they do want to approve your products. So can you talk about maybe some of the conservatism that they are having or maybe some of the caution that they are taking with respect to the approvability of these products?
Brian Markison
I think each of these products are different and each of them are also in different stages of review. So really, there's no blanket answer for all three of these. I think, certainly with Embeda, the major, I would say, issue that's on the table that has held it up for awhile has been the REMS and what type of our REMS will be applied to Embeda once it gets approved. And we believe we've reached a tentative agreement with the agency on an interim REMS that we feel will not be unduly onerous for the Company to execute, and we believe that we've a very good path forward there.
With Acurox, I think you may have seen Acura put out a press release this morning. We submitted our briefing packet to the FDA and we plan to meet with them during the last month of the quarter, and we believe we'll come out of that with a pretty good path forward. And, likewise on Remoxy, we recently met with the agency. We are quite enthused at the outcome of the meeting and we believe that we’ve a strong path forward. It's all down to execution and as we mentioned earlier in earlier releases, we're planning on filing or resubmitting midyear 2010.
Operator
Our next question comes from Adam Greene of RBC Capital Markets. Please state your question.
Adam Greene -- RBC Capital Markets
A question on the Auto-injector CP. You received a response back yesterday. Just curious what your take was on the citizens' petitions, the reply by the FDA, just how that relates to EpiPen, whether you think this was positive or negative.
Brian Markison
The long and short of it is, we believe that the response is relatively positive. I think the agency agrees with King, that if these auto injectors are different, if there's different instructions, different ways of using them, then that clearly needs to be recognized and would not facilitate an AB rating. I think these are fairly complicated devices, and in the case of EpiPen, where it's life-saving, I really think the agency is going to look at these filings on a case-by-case basis. But we, in general, view it as quite positive.
Operator
Our next question comes from Greg Gilbert of Banc of America-Merrill Lynch. Please state your question.
Greg Gilbert -- Banc of America-Merrill Lynch
I have a specific Embeda question. Brian, how would you characterize the interaction with the FDA on that product at the reviewer level? And comment on whether any other levels of the agency are involved, to your knowledge.
Brian Markison
All I can say is collaborative, we're pleased with the interaction, and stay tuned.
Operator
Our next question comes from Scott Hirsch of Credit Suisse. Please state your question
Scott Hirsch -- Credit Suisse
Did you say that you have an agreement with the FDA on Remoxy going forward, or is this really just an understanding together for what needs to be done? And then, secondly, have you moved the old Alpharma Oxy NT product into phase 3 ready position?
Brian Markison
Yes, Scott. The answer to your second question is, not yet. The answer to your first question is that King and the FDA are exactly on the same page with regard to the steps that are necessary for the positive resubmission of Remoxy. And so we’re absolutely on the same page. That's the only way to describe it.
Operator
Our next question comes from Gary Nachman of Leerink Swann. Please state your question
Gary Nachman -- Leerink Swann
I guess this one is for Joe. The cut in SG&A spend does most of that have to do with the delay for Embeda? Or are there other areas that you were able to cut more than you thought? And as spending ramps up in the second half, should we expect sequential declines in EPS?
Joe Squicciarino
What we were able to do was accelerate synergies from the Alpharma acquisition faster than we had originally anticipated. Obviously, we worked very hard to make that happen. So you might recall that we had forecasted synergies for this year of $60 million. And what I said at the beginning of this year is that that $60 million would translate into $80 million next year. So what has happened is we’re going to drive and achieve $80 million of synergies this year. And in fact, through the first six months we’ve been able to garner about between $15 million and $17 million of that already. So we haven't cut SG&A, if you will. We haven't this invested in the business. We've just been able to drive those synergies faster. And as far as EPS goes, as you know, we don't provide bottom line guidance. But I think the best way to help you out with the answer to that question is that we’re still very comfortable with our forecast of cash from ops between $375 million and $400 million.
Operator
Our next question comes from Corey Davis of Natixis. Please state your question
Corey Davis – Natixis
I want to follow on some of your final statements from your prepared remarks about the flexibility for business development and make sure I understood you correctly. So could you just spend a couple minutes just reminding us of your current capital structure and maybe what you'd expect it to look like by the end of '09? It may be too soon to project what it would look like at the end of 2010 now that you have realized these synergies faster and may be able to pay down the debt a little bit sooner. And were you implying that you would have flexibility now to do something more in BD area? Or is it something just sooner than you would previously be able to?
Joe Squicciarino
Thanks, Corey. Good question, or good questions. What we've said since we closed the Alpharma transaction is that we would remain very active on the business development front, and in fact we’ve. We have a number of things that we’re excited about. And our ability to execute on one or more of those we’ve the ability to do that. If you look at our cash position, we’ve $200 million of liquid U.S. cash, and we’ve about $240 million of liquid cash overseas. That does not include $385 million of auction rate securities that have been slow in liquidating, but nevertheless we've been making progress on that.
As far as the remaining pieces of the capital structure, we were really happy that we've been able to pay down $200 million of debt that we took on to acquire Alpharma as of the end of June. And in fact, since the end of June we've made some additional progress on paying down that debt as well. So our total capital debt position at the end of the first quarter was $825 million, and that obviously includes our $400 million convertible note. So the short answer to the question is, we’ll be able to execute, assuming we win, the opportunities that we’re looking at now, as soon as we’re in a winning position there.
Brian Markison
And, Corey, just keep in mind that we've pretty tough metrics for these transactions keeping our shareholder return at the foremost of our mind.
Operator
Our next question comes from Ian Sanderson, Cowen & Company. Please state your question.
Ian Sanderson -- Cowen & Co.
Could I get a bit more color on the review of the ketoprofen and transfer some gel opportunity, and the review of the phase 3 data as well?
Brian Markison
We are currently reviewing the data with our partner, and we’re also reviewing the market opportunity, which I think our enthusiasm has waned a little bit for this opportunity versus staying focus on the Flector Patch and launching Embeda. So when we complete our review of the data and of the resources required to promote the product and achieve meaningful levels of sales, then we'll make a determination on whether or not we want to go forward with the program.
Operator
Our next question comes from Shibani Malhotra of Goldman Sachs. Please state your question.
Shibani Malhotra -- Goldman Sachs
Hi, guys. Thanks for taking my question. And congrats on a really good quarter. I just had a question on CorVue. Can you comment on your view on the outcome of the CorVue panel and then can you also talk about the fact that you submitted additional data or supplemented your NDA? And then what are you expecting in terms of an outcome on your PDUFA date in October?
Brian Markison
Yes, thanks Shibani, and good morning. Well, I think one thing that's interesting about the panel meeting was the questions that were asked to the panelists. We did not receive those questions until the morning of the meeting. So we believe that we’ll be able to provide the agency with additional analyses that will help better answer some of those questions and we’re going to submit that to the agency, and we’re hopeful that we might get an approval. But certainly, the vote did not go our way at the panel meeting, despite the fact that people recognize that CorVue could be a best-in-class agent in terms of safety profile.
So we’ve additional information that we’ll be submitting. We remain relatively optimistic, but I think, from the Street's perspective, we’ve been very careful not to give any type of revenue guidance for CorVue in the future because it's sort of a legacy product from our earlier King portfolio. And again, I was very encouraged by the way the King team came there, the way they were prepared for the meeting and the way they handled all the questions that were thrown at them because for those that followed it was a post graduate course in statistics. So, while we did well, we didn't win the day. But perhaps the additional information we’ll be submitting will help ultimately win the day because of the safety profile of the product.
Operator
Our next question comes from Marc Goodman of UBS. Please state your question.
Marc Goodman -- UBS
I was hoping you could give us a little more flavor on what's going on in the Animal Health business, just a little more color there. And maybe, before you dive in there, Brian, just on the last question I don't understand how could you only get the questions that morning?
Brian Markison
Good morning. This is going to sound a little silly, but the only reason we got the questions the morning obviously that's when they gave them to us. But look, that's fine that's the process. And now, with respect to Animal Health, Joe, do you want to jump in?
Joe Squicciarino
Sure. The Animal Health business has performed up to our expectations this year. We've actually raised our internal forecast for the business slightly. The Animal Health team has done a great job driving the top line, but also making sure that investments are well-placed and keeping costs under control. So, as I said in my prepared remarks, the Animal Health division continues to throw off meaningful levels of cash for us. I don't know if you saw some of the disclosures that were made for Tyson and Pilgrim's Pride over the past week, but there is some light at the end of the tunnel, certainly for both of those companies. They've been able to pay down debt, they've returned to profitability. The price of chicken has started to increase, although it has a ways to go to get back to where it had been and that segment of the market is very important to us. And in fact, in the second quarter our products that are used in that part of the business performed very well. So we feel very good about the Animal Health business. It has started to turn the corner for us, and as I said, it's a big contributor to our cash flow.
Brian Markison
And, Marc, we've said earlier that the turnaround or the growth in this business will follow the economy. So, while there is still debate about recovery of the economy, as Joe mentioned, we're moving in the right direction and we’re hopeful that we’ll have a strong second half here.
Operator
Our next question comes from John Newman of Oppenheimer. Please state your question.
John Newman -- Oppenheimer
Hey, guys, just had one-follow-up I just wondered if you could give us a little bit more color on your thoughts with Remoxy. I'm just wondering if the agency raised any questions regarding the formulation there, given your time line for resubmitting, and also if you would need to provide them with any additional stability data. Thanks.
Brian Markison
Again, I remind the audience that we’ve not disclosed a lot of information concerning the complete response letter that we did receive on Remoxy. So I'll do the best I can with what I'm willing to share. And right now, what we've previously disclosed is we’ll need to generate six months' stability on the formulation before we can file, and that really is the rate limiting step here. So we’re pretty enthusiastic about the path forward. Obviously, we’re going to be supplementing the NDA with a lot of new information, and we’re excited about that. And, again, the real rate-limiting step here is supplementing the NDA with six months stability data.
Operator
Our next question comes from Elliot Wilbur of Needham & Co. Please state your question.
Elliot Wilbur -- Needham & Co.
Thanks. Question for you, Brian. Assuming that Embeda approval does come and launch happen before year-end, how should we be thinking about Avinza going forward? I understand it's an owned asset, but you do have a royalty obligation to Ligand. Can you simply just stop promoting it, and then does it sort of die a slow and natural death or are you under any sort of performance obligations with respect to the original purchase agreement with Ligand?
Brian Markison
Yes, certainly we’ve we had obligations to Ligand with respect to Avinza. But at the end of this calendar year, the level of support that we’re required to give Avinza does reduce dramatically. And we also have obligations, as well, to Elan, and we intend and we'll honor all of those obligations. But having said all of that, I think Embeda will take some share from Avinza. Our market research that suggests that, Embeda being the first product out with the potential to deter misuse and abuse, will take share across the board from the long acting opioid space. And it is likely that Avinza will share in that. But, again, Avinza is a long acting opioid as well. The once a day profile is really well entrenched with a number of our customers, and we’ll continue to support that. And with Embeda, we’re going to be going after bigger fish. So we’re really more enthusiastic about the prospects of Embeda, and we remain pretty pleased with what we think the prospects for Avinza are.
Operator
Our next question comes from Michael Tong of Wells Fargo. Please state your question.
Michael Tong -- Wells Fargo
As you go through the process of trying to get Acurox approved, anything in this process that you've gained so far can help you with the follow-on products related to the immediate release abuse-deterrent platform? And what is your appetite or what's your level of enthusiasm for additional products in that platform, given the noise surrounding acetaminophen and perhaps lowering the maximum allowable dose on a daily basis?
Brian Markison
I think our enthusiasm for the platform remains very high. Obviously, the meeting coming up in September for us is a key meeting with the agency and for Acura and for King. And what we learn in that meeting certainly will help us as we shape the ongoing products in the portfolio. We certainly have an appetite to continue developing the Acura portfolio with our partner, and plans are full-speed ahead and nothing has changed. So we remain enthusiastic. We are learning a lot through our various interactions with the agency. It seems like we’re there quite frequently these days, and naturally, all of those learnings we’re applying to the follow-on compounds that are in development. With regard to acetaminophen, we've already taken some of those concerns into account with our future formulations, but we’ve not disclosed the precise amount of acetaminophen that would be in those formulations.
Operator
Our next question comes from Bert Hazlett of BMO Capital Markets. Please state your question.
Bert Hazlett -- BMO Capital Markets
Thanks. You just got to my Acurox question, so we'll switch to Embeda. Could you again just try to crystallize what has changed, if anything, in terms of your interaction with FDA that gives you confidence that there should be a relatively near-term launch with that product? And then, just quickly, if you could clarify why now you are excluding the interest on the convert?
Brian Markison
We'll do the convert question first, Joe, if you don't mind.
Joe Squicciarino
Starting in the first quarter of this year we went to, in quotes, a cash basis of reporting EPS, even though it's not truly a cash basis. And we did that to be more in line or to be in line with our competitors. So not only do we exclude the effects of APB-14, that is, the non-cash portion of interest expense on the convert, but we also exclude the impact of amortization as well.
Brian Markison
And with regard to Embeda, our interaction with the agency, as I've said earlier, has been productive and we’ve given the agency everything that they need, and really the ball is in their court. So quite frankly, we’re very optimistic about a near-term approval, and there's really not much more I could say about it.
Operator
Our next question comes from Adam Greene of RBC Capital Markets. Please state your question.
Adam Greene -- RBC Capital Markets
You didn't talk to Avinza performance in your opening comments. So I'm just curious is the decline a function of the de-emphasis of the marketing behind that? Scripts obviously are on a decline now. And then, along those same lines, what is a good ASP to use going forward? It had been around $230 for most of 2008 and then jumped up to $270, and now it's back down to $204. So I was just curious what we should think about this going forward.
Joe Squicciarino
I'm going to just answer a part of that question for you, and then Steve Andrzejewski, our Head of Commercial Ops, will talk about script performance and some of the other things that you highlighted. Avinza sales this quarter were lower than they have been, and there were a couple of things that affected Avinza performance this quarter. Most notably, Avinza, along with a number of other of our key products experienced in relative terms a significant downturn in the amount of inventory that was held by our wholesalers. And as best we can calculate that impact across our whole portfolio, it was somewhere between $17 million and $20 million for the quarter.
We don't normally comment on the impact on sales because there were fluctuations every quarter. But this quarter, all three of the big wholesalers did take their inventory levels down. I can only speculate as to why I'm assuming it was just to manage their working capital. And since the end of the second quarter, we've actually seen the weeks on hand start to trend up. And so the impact on Avinza relative to that was about $3.5 million to $4 million this quarter. Then we also had some one-time adjustments in our gross to net captivation for Avinza, which also broke down sales in the quarter. And I don't anticipate that we'll have that same impact in the remaining two quarters for the year. I'll turn it over to Steve now, and he can talk about the other portions of your question.
Steve Andrzejewski
In terms of Avinza prescriptions, our market share over the last three months for Avinza has stabilized, and that's a good sign. In addition, one of the things that's adding to the script counts for Avinza is the market performance, which, year-to-date, is down about 2%.
Operator
Our next question comes from Greg Gilbert of Banc of America-Merrill Lynch. Please state your question.
Greg Gilbert -- Banc of America-Merrill Lynch
Thanks. Two part follow-up. First, can you list and quantify any recent price increases that we may not have seen yet? And, Joe, on the interest, can you give a breakdown of your interest expense into actual interest expense on outstanding debt, amortization of the deferred financing costs and any other items in that number? It didn't look like we benefited from relative to Q1 levels, even though you've paid more debt down.
Joe Squicciarino
Sure, Greg, let me answer the price increase question first. We did take some price increases during the second quarter of this year. They were all single-digit price increases and the increases that we took were on Altace, Skelaxin and the Flector Patch. Good question on interest expense. As you point out, we've paid down a significant portion of our debt, and yet our interest expense, if you look at the GAAP P&L, is actually up about $4.5 million, $5 million versus the first quarter. So, let me lay that out for you. Actual cash interest expense meaning the payment of real interest expense on our debt levels in the first quarter was about $11.1 million, and this quarter it was about $10.3 million. So you see the downturn in the lower interest expense.
Probably not as much as you would have anticipated, but a significant portion of the paydown on the debt took place in the back end of the quarter. So we'll get a benefit for that in this third quarter. Where we did have increases in interest expense pertains to the amortization of debt issuance costs. So in the first quarter it was a little under $6 million, and this quarter it was about $9.6 million, for an increase of just under $4 million. And why is that as we pay down the debt faster, that rate of amortization increases. And then same applies for the amortization of the OID for the term loan. In the first quarter it was about $1.5 million, and in the second quarter, $2.7 million. So when you add both of those deltas up, it gets you to the approximate $5 million increase quarter-on-quarter.
Operator
Our next question comes from Ian Sanderson of Cowen and Co. Please state your question.
Ian Sanderson -- Cowen and Co.
Joe, your SG&A guidance implies a pretty aggressive spend behind the Embeda launch. And without sampling or advertising allowed, where is that spending expected to go?
Joe Squicciarino
I'll let Steve Andrzejewski talk about some of the components of what we consider to be an optimal launch scenario. We've said from the beginning that for not only Embeda, but for all of the products that we're going to be launching, we’re going to invest optimally to make each of these products a success. And I'll let Steve talk about the components expense.
Steve Andrzejewski
In terms of the Embeda launch, obviously we’ve a number of advertising type materials, educational materials that our sales representatives use. We're going to do some journal advertising. In addition, there's speaker training meetings and speaker programs to educate the marketplace about Embeda and about the REMS program associated with it. So that's where the focus of the launch expenditures will be.
Brian Markison
I think, Ian, you can think about this as a launch that will be heavily channeled through medical education and direct sales force involvement because certainly, as you pointed out, there are limitations in what you can do and how you can promote opioids.
Operator
Our next question comes from John Newman of Oppenheimer. Please state your question.
John Newman -- Oppenheimer
Hey, guys, just had one follow-up on Acurox. Given the comments that were made at the last FDA panel for the class-wide REMS on the long acting opioid, it seem like there were a few people that mentioned there's a significant amount of abuse with the short acting opioids. I'm just wondering if, in your contact with the agency at any point in time, if they've given any indication whether they are thinking along those same lines or if they are sticking to the long acting opioids at this point.
Brian Markison
Yes, John, thanks for the question. We're really not talking to the agency about a REMS and the application of REMS for short-acting opioids. However, I don't think it's out of the realm of possibility, because certainly, when you look at prescription volume for products like Vicodin and generic equivalents and acetaminophen with Codeine, there certainly is a lot of recognized misuse and abuse in the short acting market. But right now, I think efforts seem to be most focused on the long acting market. And it's a smaller nut to crack in terms of prescription volume. But also, as everyone's aware, there's also more devastating consequences from the abuse of those products. So it's not unreasonable to think that we could get there on the short-acting market, but I think for now, we're going to try to crack the long acting market first and see if we can work with the agency for an industry-wide solution. But that will take some more time. It turns out that this is much more complicated than people have thought and issues of patient access are really at the foremost of everyone's mind here.
Operator
Our next question comes from Elliot Wilbur of Needham & Co. Please state your question.
Elliot Wilbur -- Needham & Co.
Just a couple of P&L questions, for Joe, specifically with respect to your comment on the synergy realization, it wasn't clear to me whether or not that was just a pull-forward of synergies that were expected to be realized in 2010 or actually could be additive to the it was $80 million you talked about as a target for 2010. And then, just real quickly, on the P&L, it looks like there's a pretty favorable swing in the other income line. Just curious what was driving that.
Joe Squicciarino
As far as the synergies go, it is a pull-forward. So as I said earlier, we had originally forecasted $60 million for this year and $80 million for next year. So that $80 million has been pulled forward, and that $80 million will not increase next year. In other words, we've achieved the ultimate level of synergies that we had forecasted sooner than we had originally thought. And I have to be very candid with you, the other income, I have to just dig into some details here, so I will answer that question a little later on in the call.
Operator
Our next question comes from David Buck of Buckingham Research Group. Please state your question.
David Buck -- Buckingham Research Group
Yes, thanks for taking the question. On Skelaxin, can you just talk about what the latest status is of litigation and any type of negotiation? I know that most people, including ourselves probably have some generic competition coming in this year. But, I just wanted to get an update on what you're doing to prevent that. And on Meridian medical, can you just give us some sense of how the new launch of the EpiPen is going to be flowing through from a P&L perspective shipment, etc.;? Thanks.
Brian Markison
On EpiPen, it will come through the P&L exactly the same as the current EpiPen. So there will be no change there. And with regard to Skelaxin we're at the very early parts of the appeal process and we continue to stand behind our defense and belief that Skelaxin should remain exclusive. However, for folks who have generic centering in their model at some time this year, that's fine. Certainly, we've said that we hope to keep it exclusive this year, but next year it's doubtful. But at the same time we remain encouraged that we've a strong appeal, and ultimately we hope to prevail on that appeal but we're at the very beginning of that process.
Operator
Our next question comes from the line of Greg Gilbert of Banc of America-Merrill Lynch. Please state your question.
Greg Gilbert -- Banc of America-Merrill Lynch
Joe, just asking you about SG&A a little differently. Putting aside your guidance for the year, can we look at the $119 million in the quarter as indicative of the new structure and size of the organization in the absence of any significant launch related activity? Are there other pushes and pulls we should consider before we use that kind of number?
Joe Squicciarino
Yes, $119 million I would consider as the low end. We had some activities, future, normal ongoing activities that were a little light in the quarter. So I would put that $119 million up closer to $4 million to $5 million higher than that.
Operator
Our next question comes from the line of Gary Nachman of Leerink Swann.
Please state your question.
Gary Nachman -- Leerink Swann
Hi, broader question on the Meridian business. Do you have good visibility on the annualized run rate? It does seem to keep trending higher. Is there anything that you think could impede that growth over the next few years? What are the real contributors that you see for the next few years? Thanks.
Brian Markison
Well, Gary, I think, first up, Dey Labs is really focused on the product now. They've made some organizational changes. They've moved their commercial operating team out here not too far from us in Bridgewater, and the collaboration with us and Dey, has never been better or closer. They're looking at EpiPen within the myelin family of products and companies as a driver of growth in the future as well. So, I think the good news here is we've got a focused partner that's putting some investments behind EpiPen as well. So, we don't see a lot that's going to impede growth going into the future, and we’ve fairly good visibility as to the movement of the product in the marketplace. And as you said, it's predictably going in the correct direction. And I think Joe wants to add a little bit to that.
Joe Squicciarino
Yes, the other piece of the Meridian business, as you know, is the government piece, and as we've said in the past, that is episodic, we had a good quarter with orders from the government, again, it's not something that's ongoing and sustainable in terms of the level of orders although for the past three quarters to four quarters, we've had really good results from that piece of the business.
Operator
Our next question comes from the line of David Buck of Buckingham Research Group. Please state your question.
David Buck -- Buckingham Research Group
Yes, just one final clarification on Embeda. Can you give some sense, Brian, of what gives you confidence that if the ball is in the agencies court that you'll actually get a decision before there's more of a decision on the industry-wide REMS? Have you had any feedback basically giving you comfort that you can get the approval before that?
Brian Markison
David, I can only tell you that our confidence stems from our interaction with the agency. We know for a fact that the product can be approved prior to an industry-wide REMS solution, and I think if we look at the merits of Embeda, it certainly deserves to be approved. I really would be loath to tell you much more about what's happening here because I think I need to give both King and the FDA a little bit of wiggle room in the event things change. But again, we’re very positive. As we mentioned in the prepared remarks, we're scheduling training meetings for the field sales force to refresh their training, and we think we'll be out there relatively soon. So again, I apologize for not going into more detail but I'm not sure it would be appropriate at this time.
Operator
With no further questions, I would like to turn the floor back over to Jack Howarth.
Jack Howarth
Thank you for joining our conference call today. We appreciate your interest in King Pharmaceuticals and look forward to speaking with you again when we report our financial results for the third quarter of 2009. As always, if you have any additional questions, please contact me at 908-429-8350. Thank you, guys.
Operator
Thank you. Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time and have a great day.
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